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Prince-ly returns from the Because Effect

I’ve been fascinated by the Because Effect, ever since Doc Searls first discussed it with me, set against the backdrop of Doc’s Making a New World and Stewart Brand’s The Long Now. What is this Because Effect? Doc describes it better than I can, but if it helps you any, I use the following definition:

When something that was originally scarce starts becoming abundant, something strange happens. You find that you start making money because of that thing rather than with that thing. That’s the Because Effect.

Prince has often struck me as an incredibly talented artist as well as someone who really understands trends. So it was with some amusement that I read this story, where he is described as having done a deal with the Mail On Sunday to give his latest album away free before it hits the shops.

Now that’s avant-garde. Don’t just give a track or two away, give the whole thing away before you put it on sale. I know, I know, you’re going to say “he should have made it a free download” or something like that; or rather, the Mail On Sunday should have done a deal whereby anyone who signed up to their free online edition had the right to download it for free or something like that.

Whatever. The point is that Prince understands how he makes money, what’s scarce and what’s abundant about it. Digital downloads are abundant. Concert appearances are scarce. He makes money because of his CDs and not with them.

A word of caution. Some people are just not comfortable with abundance economics, so they try to create artificial scarcities as they go along. Second nature to them, I guess. So please don’t be surprised to find that someone dreams up a scheme whereby concert tickets start being offered as triple plays at grossly inflated prices, bundling together the concert with the CD and the T-shirt. [In this context, there’s a lot of noise about artists being offered “360-degree” contracts by media companies, this is a dangerous trend.]

You cannot bundle abundance with scarcity, it’s like trying to implement region coding of the air that you breathe. But then some people will try anything.

Although I agree with your comments on the “Because Effect”, this isn’t a “pure” example – Prince wasn’t giving away the album, the Mail on Sunday was – and they paid Prince for the privilege. I read that Prince made more money from the Mail deal than he did from sales of the album in the US (I’m afraid I cannot remember where I read this). The Guardian article you link to states: “The paper, which sells more than 2m copies a week, will be ramping up its print run in anticipation of a huge spike in circulation but would not reveal how much the deal with Prince would cost.”

I think the Prince album giveaway is an illustration of the fact that the music industry needs to look at new business models, but not really an illustration of the “Because Effect”.

Martin, thanks for the insight. It leads me to ask another question: Did the MAIL have a stake in the concert series, say, of an investor/sponsor nature? If they were making money off of the box office take, then they may have seen the CD distribution deal as an investment in promoting the concerts from which they would benefit. (Of course, even if they had no stake in the concerts, like any other newspaper they must be desperate to recover their reader base. Achieving this goal by giving away stuff is a standard marketing ploy. What are their circulation numbers like these days?)

I have to confess that I am no great fan of the Because Effect. I may be overly cynical; but I believe that beneath every act of altruism is an egoist interest struggling to get out. Self-interest (enlightened or otherwise) is thus the ultimate driver of the decisions we make. To invoke JP’s latest turn of phrase, everything we do is a “So As” act; and any “And” consequences are (happily) fortuitous.

This is an interesting observation. Music is clearly valuable because people want it.

Previously, money was made by adding on a “tax” to the distribution process. This worked well because distribution costs money, and so getting a copy involved a financial transaction. Thus, collecting a bit extra to compensate artists/recording companies/etc. was not a big problem.

Now that distribution costs nearly nothing, and anyone can make a copy and distribute it almost for free, this model breaks down.

The question now is “how does an artist extract value from music?” The Because Effect is one way — let the popularity of your music generate other revenues (e.g., concerts). Are there other ways that artists can make money from their music. Is there a direct means of extracting revenue or is the Because Effect all there is going forward?

This is so interesting. The Berliner Philharmoniker uses a kind of in between. They are not (yet) giving away anything for free, but are making the scarce less scarce by selling tickets to follow their live concerts online. The Berliner mainly plays in Berlin and is usually sold out, also on their (international) tours. So this way they make money out of people who would like to come, but can’t at a reasonable price. I’ve watched their first concert in the Digital Concert Hall and the quality of both sound and visual are OK. It’s weird, because it doesn’t have the thrill of being in the IRL Concert Hall, but still it’s better then a CD.
They made an arrangement with their recording company, and with the recording companies of visiting artists (soloist, conductors), so it’s not as easy as when you have all your resources in your own hand, as does prince. But never the less an interesting development.